Goldman Sachs: If the Strait of Hormuz reopens, it prefers oil tankers, airlines, and shipbuilding stocks. Among transportation stocks, COSCO Shipping Energy Transportation (01138) has the largest potential for upside.

Goldman Sachs released a research report stating that there are media reports that the United States and Iran have reached a framework agreement to end the war. If the Strait of Hormuz reopens and Iranian oil sanctions are lifted, it will have a significant impact on the Chinese transportation industry. In the scenario analysis, the bank prefers tanker, airlines, and shipbuilding stocks. The bank pointed out that among the transportation sectors covered, COSCO Shipping Energy Transportation (01138) has the largest potential for upside. With the reopening of the Strait of Hormuz, the previous oversupply of about 9% to 11% of crude oil and oil products tanker transport due to the closure of the strait will be reversed. In addition, if exports in the Gulf region return to normal by the end of July, there is a potential demand of about 5% for global crude oil inventory replenishment, enough to offset the inventory consumption caused by the strait closure. Goldman Sachs expects that in the first year after the strait reopens, the Time Charter Equivalent (TCE) for Very Large Crude Carriers (VLCC) is expected to reach $250,000 per day, significantly higher than the benchmark forecast of $150,000, which will drive a 57% increase in company profits. Goldman Sachs further pointed out that in a more optimistic "blue sky scenario," if the sanctions on Iranian oil are completely lifted, an estimated additional 5% of shipping demand will shift from the shadow fleet to the compliant fleet. This scenario will further drive VLCC TCE to surge to $350,000 per day in the first year after opening, leading to a potential profit increase of 114% for COSCO Shipping Energy Transportation. Goldman Sachs estimates that in the baseline scenario, if the normalization point is moved up from the end of August to the end of July, the price of oil per barrel could decrease by $10. Based on this, the bank estimates the profit improvement for the covered airlines as follows: the three major airlines by 16%-26%, Spring Airlines by 4% (benefiting from lower fuel costs and increased demand due to lower fuel surcharges), and Eastern Air Logistics by 4% in terms of upside. If exports in the Persian Gulf return to normal by the end of July 2026, the potential increase in the H-shares of the three major airlines is about 60%-70%. Although the reopening of the Strait of Hormuz may not have a significant short-term profit impact on shipbuilders (due to limited exposure to risk), Goldman Sachs believes that maintaining high freight rates and increased trade visibility will encourage shipping companies to place new orders for vessels, leading to an acceleration of order momentum after a slowdown in May. This could be a positive stock price driver for the shipbuilders covered by the bank. Among the covered shipbuilders, the bank prefers Guangdong Songfa Ceramics (603268.SH), whose main asset is Hengli Heavy Industries, benefiting from rapid expansion and stronger order momentum in the industrial upturn cycle. Goldman Sachs takes a cautious stance on the container shipping sector and COSCO Shipping Holdings (01919). The bank believes that if geopolitical tensions ease and the Red Sea reopens, major shipping companies will resume their plans to return to the Suez Canal route, releasing about 10% of global effective capacity with shorter voyages and bringing mild downward risks to container shipping rates. The bank predicts that in the scenario of completely adjusting the detour route around the Cape of Good Hope and returning to the Suez Canal, COSCO Shipping Holdings will benefit from its cost advantages, reducing costs by $30 per twenty-foot equivalent unit (TEU). Performance will be better than peers who only reach breakeven, and the company still has strong port operations, interest income, and investment income support. However, after calculation, its net profit is expected to have a 48% downward space compared to the benchmark forecast. Goldman Sachs reiterates its "sell" rating on COSCO Shipping Holdings with a 12-month target price at HK$10.9.